An indicted Larkspur hedge fund manager was returned to jail after authorities discovered he was continuing to execute trades using a tablet computer that he had hidden in the ceiling of his attorney's office in San Francisco.

James Michael Murray was arrested in 2012 and charged with wire fraud, money laundering and aggravated identify theft. According to the indictment, Murray executed a scheme to defraud more than $700,000 from Chase Paymentech, a credit card processing company. Separately, the Securities and Exchange Commission has charged Murray with defrauding investors who put money in his hedge fund, Market Neutral Trading, by giving them a bogus audit report that exaggerated the financial performance of the fund.

For Murray, who is now held at Santa Rita Jail in Dublin, it is the second time he has been returned to custody after violating the terms of his release pending trial.

A number of conditions were placed on Murray's second release. He was required to reside at a halfway house in San Francisco, and he was prohibited from having access to a cellphone or the Internet or trading through third parties. He has no money of his own left with which to trade.

Murray was allowed to use a computer at his attorney's office on the condition that the computer afforded him no Internet access. A search of that office by the FBI on Feb. 26, however, revealed that Murray had hidden an ASUS Nexus tablet computer in the ceiling of the small conference room he was allowed to use at Pillsbury, Winthrop, Shaw, Pittman, according to court records.

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FBI Special Agent Brian Weber requested the search warrant after receiving a tip from another resident of the halfway house. The resident, a convicted bank robber, said he purchased the computer tablet for Murray at his request. In his affidavit requesting the warrant, Weber detailed the information supplied by the "cooperating witness," whom he did not name.

According to the witness, Murray told him he couldn't buy the tablet himself because he spent all his time at the law firm and had escorts between the halfway house and the law firm. Murray told the witness that at the law firm he was allowed to work alone in a conference room with the door closed and that no one ever entered the room without knocking first. Murray said he hid the tablet in the ceiling tile when he left the firm each night, in case he was searched at the halfway house.

Erik Cummins, a spokesman for Pillsbury, said, "Although Mr. Murray is no longer our client, under applicable rules of professional responsibility, we cannot discuss any details of this matter." Pillsbury was assigned by the court to represent Murray pro bono because he lacks money to pay a lawyer.

The witness said Murray told him that he was connecting to the Internet via the law firm's free wi-fi and trading using an account at Interactive Brokers. The witness said that at Murray's request he had allowed Murray to use his Gmail account for email and data storage. According to Weber's affidavit, Murray also asked the witness to open a Skype account and a Viber account in the witness's name in order to connect via the Internet with individuals in Monaco.

The witness said Murray told him he was trading under the name of Gian Luca DiFrancisci, a wealthy Monaco resident, who had deposited $25,000 into his trading account. Another one of the conditions of Murray's release was that he have no contact with DiFrancisci.

That is because authorities are scrutinizing a $3.5 million trade that Murray made in association with DiFrancisci under the Market Neutral Trading name, after all of the company's assets had already been seized. Murray realized a $410,000 profit by shorting Netflix stock.

"What would have happened if this short sale didn't end up so short?" asked U.S. District Court Judge Edward Chen during a March 6, 2013 hearing.

Murray's attorney at the time, Garrett Zelen of Los Angeles, replied, "Mr. DiFrancisci would be on the hook."

But Assistant U.S. Attorney Robin Harris, who is prosecuting the case, said DiFrancisci entered the picture only after the trade was completed. She said Oppenheimer Funds, which completed the trade, would have sought to recover any losses from the former shareholders of Market Neutral Trading.

During the March 6, 2013 hearing, Harris said, "That Oppenheimer account was opened in February and cleared for trading based on representations that those investors were part of the funds and had put up assets which would guarantee those trades."

On March 11, 2013, Zelen was disqualified as Murray's attorney. According to court documents, $150,000 from the Netflix trade profits were wired to Zelen, who in turn wired $100,000 to Murray's father, Michael Murray, and the elder Murray then turned $15,000 over to his son and deposited $50,000 into Event Trading.

During the March 6, 2013 hearing, Judge Chen asked, "Well, doesn't this look like money laundering?"

Zelen, however, maintained that the company that executed the Netflix trade was separate from Market Neutral Trading, so he had acted properly.

"A new account, unrelated other than in name to the old account, was operating in a brand new brokerage firm with zero money deposited, zero," Zelen said.

Reached by phone Wednesday, Zelen declined to elaborate. He said all his comments are documented in the court record.

"It contains all the information you would be requesting," Zelen said.

When Judge Chen was considering whether to release Murray from jail in July 2013 he noted that Murray's passport had been confiscated and restrictions had been placed on his ability to travel due to the risk that he might flee.

In his affidavit for the search warrant, Special Agent Weber said he examined the Gmail account that Murray had been using and in addition to emails Murray sent to DiFrancisci he discovered an email to a company called Private Jet Charter. The email requested a private jet flight quotation for one passenger for one-way transportation from San Francisco to Switzerland.

Alan Dressler, a San Francisco lawyer who is now representing Murray, said Murray was unavailable for comment.